Cheque bounce


A cheque, no doubt, is one of the most popular financial instruments used for making convenient and safer payments. A person signing the cheque orders the bank to make the payment of specified amount to the account of the payee. On the other, there are certain situations when a bank denies honoring the cheque and refuses to make the payment to the payee. This is referred to as cheque bounce.

There could be several reasons for dishonor of cheque. Whenever this happens, the drawee bank issues a ‘Cheque Return Memo’ to the payee’s bank immediately specifying the reasons of cheque bounce. Cheque can be resubmitted within 3 months of the date mentioned on the cheque only after fulfilling the dishonor reason.

It may be noted that as cheque is a significant financial instrument used for banking transactions, a dishonored payment also invites certain legal actions and could even invite criminal charges against the signing authority. Therefore, it is vital to look after the reasons of cheque bounce to make sure that you don’t make up to any one of them.

Insufficient funds – This is often the most common reason why the payment is dishonored by the bank. If a drawer’s account doesn’t have sufficient funds to clear the cheque payment, then the cheque is returned or dishonored by the drawee bank. Hence, while filling a cheque, make sure to keep sufficient funds in the bank account on the date mentioned to avoid cheque bounce charges.

Mention the dates correctly – Though this factor is usually overlooked, but little did we realize that this could be a major factor resulting in cheque bounce. Yes, it is very important to know ‘How to write a cheque’ to avoid dishonor of cheque. There could be different formats to put the date on a cheque such as DD/MM/YYYY or MM/DD/YYYY. So, make sure to check out the format first to write the date in a correct format.

Mismatch of signature – When it comes making payments, banks are utmost careful with every minute details. This is the reason why mismatch of signatures is a major reason for cheque bounce in India. If the signature doesn’t match as per the bank records then the drawee would dishonor your cheque.

Difference in amount – It may be noted the amount on a cheque is written in both words and numbers. And if there seems any difference in the amount in words and numbers, then the bank would not clear the cheque. Therefore, it is important to fill the specific fields with utmost care to ensure the cheque is cleared on time.